All Forum Posts by: Suzanne P.

After a number of Joint Ventures and gap lending deals in Canada and the US, my journey towards becoming an active flip investor in the US continues. I just completed an asset protection conference in the US and there are several key issues affecting Canadian flip investors in the states:

1. Proper entity selection for liability protection and to avoid double taxation

2. Ability to open a US corporate bank account

3. Access to HML financing

Regarding point 1: In our seminar we were taught that the proper legal structure for Canadians is a C-Corp, a Limited Partnership and a number of LLCs, each of which would hold one flip property. I am not quite sure how the C-Corp is related to the LP, but the LP apparently is supposed to hold the LLCs. Apparently, if the LLCs were owned directly by the C-Corp this would result in double taxation since the CRA (Canada Revenue Agency) does not recognize LLCs as flow-through entities for double taxation (if I remember correctly). What is the proper corporate setup for Canadian investors in order to avoid double taxation yet still have asset protection for multiple flip projects?

Regarding point 2: Many of my Canadian investor colleagues have faced the same issue when it comes to opening a US bank account. Through a real estate training academy we were set up with a Wyoming C-Corp with a nominee structure for privacy and asset protection. However, that appears to create a problem for bank accounts as BMO Harris does not like the anonymous nature of these accounts while Wells Fargo, on the other hand, has a problem with the Wyoming business address that was provided by the law firm that set up the C-Corp for us. What is the best and easiest way to get a corporate bank account set up for a Canadian investor?

Regarding point 3: Some of my Canadian colleagues have indicated that they are talking with US hard money lenders and initially hearing that it is not a problem that they are located in Canada. Once they move forward towards doing an actual deal some of these Canadian investors experienced serious issues in obtaining hard money loans and in some cases were unable to close the deal. What is the situation with Hard Money Lenders and out-of-country investors (particularly Canadians)? Are they less willing to extend HM loans to Canadians or at worse conditions? If so, what is the best way to find an HML that will extend good conditions to Canadians?

Any input regarding Canadian-based real estate investors, HMLs, legal / tax / banking issues would be greatly appreciated.

Thank you @Bob E., for your detailed explanations, I really appreciate it. This is the type of practical advice that is really helpful to a new note buyer. I am currently spending a lot of time educating myself about notes, and there is certainly a lot to learn about the legal procedures involved. I am also looking at joint ventures to get going in the notes business and learn hands-on. Many thanks again for sharing your knowledge....

Great, Tim, much appreciated. I will touch base with Nathan. Thanks!

My journey with Bigger Pockets continues, and for the last little while I have been focused on the note investing arena. As far as real estate is concerned, I have experience with buy and holds, joint ventures (as a money partner / gap funder on flips) and most recently with active flips. I have also done mortgage lending in Canada (on 1st, 2nd and 3rd mortgages) that were originated by a mortgage brokerage. 

Recently I was listening to some podcasts on Bigger Pockets about note investing and have been inhaling content about this topic ever since. Obviously with my mortgage investing background I have some understanding of the subject matter (I even read the entire Canadian mortgage agent course material etc.), but note investing is a bit of a different animal since you are dealing with a secondary market, with buying / reselling notes as well as with all sorts of different exit strategies. 

I am wondering if there are any Canadian note investors out there that would be willing to share their experience. Of course, I will be very grateful for any insights and advice from any investors anywhere to hear about their journey in note investing. 

At the moment I am still in the learning phase, but I would like to get going with some of my own capital in the very near future. What is the safest way to do so? I have been reading about joint ventures and would love to hear from anyone who has experience in note investing joint ventures or would be interested in doing a JV together. Thank you in advance.

Hi @Larry Smet, I am planning to come. Please let me know if the event is still on. Thanks. 

Thank you@Brian Adams for the tip, and yes, I would definitely like to connect with you @Dave Van Horn, as you are a true expert in the note investing business. I am note sure if I can join the Free Note Investor Q&A Call on Jan 18 since I am flying out to a conference that day, but I will definitely look into the services that your company provides. I have already read your ebook and am searching for the best way to actively get started in note investing. Thank you also for your kind offer to answer some of my questions, and I will definitely take you up on that as I progress further into this topic. 

@Steve Hodgdon: Thank you for your response. I love the goal-setting process you mention - having very specific goals in mind is just so much of a stronger motivator. My goal right now is to learn as much as possible about the note business to feel comfortable in the next few weeks to get out there and start actively investing in notes and to build up my hands-on experience level. 

I am very intrigued with the creativity and the leverage of the note business and the diverse exit strategies that one can pursue with a note, but I also intend to learn about the regulatory side and the caveats / risk factors of this business. My first priority with lending and investing of any kind is capital preservation, and from that point forward I take calculated risks. At the moment I have several active flips and flip JVs on the go, and I plan to fit in note investing as a complement to my active real estate investing. Who knows, maybe at some future point note investing will become my primary focus....

Since yesterday I have already taken a free 5-video introductory course on note investing and purchased a (very affordable) online video course from an expert by the name of Eddie Speed. I have already watched the first 2 of 6 videos plus there are several bonus videos. Note investing, on a theoretical level at least, is starting to make much more sense. Many of the concepts are quite relatable given my experience as a mortgage lender, buy & hold and flip / JV investor.

So my immediate goal is to get up to speed as quickly as possible and to start deploying some capital soon to get some hands-on experience with notes. I love this forum and I appreciate all the input from colleagues of any experience level. Thanks to everyone for their comments and insights on note investing. 

Thank you, @Mark Pace, @Dennis Weber, @Don konipol, @Steve Hodgdon, @Bob Malecki, @Dion DePaoli, for your responses. I have had a few crazy days and wasn't able to get back to you and thank you for your input. I really appreciate all your input and I will investigate some of the resources you suggested in greater detail. My style of investing is what I would call "semi-passive", for example, for my flips I work with wholesalers and project managers and I don't mind a smaller profit margin for less active / less hands-on management. 

As I said earlier, I can do purely passive investing here in Canada with second mortgages with a return of 12 to 15%. Is there a strategy with notes that is semi-passive and involves a greater return? (Maybe buying from note brokers or doing joint ventures)?

In one of the podcasts I was listening to they were talking about a "rehabbed non-performing second" (I don't remember the technical term, but it was a re-performing note). At any rate, the note was purchased at a fraction of face value (maybe 10 or 15% if I remember correctly) and the note buyer was able to work out a payment plan with the borrower that gave him a 25+ year sizeable positive cash flow.The example I heard sounded almost like long-term rental property ownership except the cash flow is coming from the note rather than from the property (hence no property management and tenant hassles). 

This strategy sounded very interesting, and I am wondering if there any specific resources or service providers out there that specialize in semi-passive note investing with good returns. Thank you in advance for any further comments you may have. 

Tampa Rental Property Wholesale Deal – Cap Rate 26.28%!

Looking for a quick buyer, due diligence period ends tomorrow (original buyer backed out last minute). I am helping one of my colleagues who has found a unique boutique bungalow with an in-law suite and a legal mobile home – all rentable units. Property also has an extra lot in the back with its own folio that is included in the sale (buyer would need to do their own research whether this lot could be built on). Centrally located in Tampa, close to restaurants parks and expressways.

Property details:

3 bedroom, 2 bathroom bungalow, 1,046 sf + 1 bedroom 1 bathroom mobile home

Lot size: 6,100 sf

Year built: 1920

Financials:

EMD $1,000.00
Purchase price: $105,000 (wholesale fee included)
Closing cost: $1,700 (estimate)

Units and income:
Main house: 2 bed 1 bath (currently owner occupied) - $1,200 income

Mother-in-law house: 1 bed 1 bath (tenant occupied) - $600 income

Mobile home: 1 bed 1 bath (tenant occupied) - $500 income

Total monthly income: $2,300

Annual gross income: $27,600

Cap rate: 26.28%

Cashflow breakdown:

ROI (cash)
Purchase price (includes wholesale fee): $105,000
Closing cost: $1,700
All-in-cost: $106,700
Annual gross income: $27,600
Estimated expenses: $3,500
Cash-on-cash return: $22.58%

ROI (financing)
Finance (80%): $84,000

Down payment: $21,000

Annual gross income: $27,600

Mortgage annually 6%: 6,000
Expenses annually: $3,500

Net operating income: (NOI): $18,100
Cash-on-cash return: 86.19%

Google drive link: https://drive.google.com/file/d/0B8jk4sMIl6ngSXhveDM5djkxbjQ/view

Call Alex 416-569-9090

Bigger Pockets continues to amaze me - thank you, Josh and Brandon for creating such an amazing forum & knowledge treasure trove! I listened to the podcast with Dave Van Horn yesterday about note investing. I have some experience with this since I have been lending on second mortgages in Canada with a return of about 12 to 13%. These were new mortgages that were originated by a mortgage broker and I was the second mortgage lender who was secured through a 2nd mortgage. Since I needed more cash flow/ a bigger return I have started to do joint ventures as the money partner with active investors on flips where the return is significantly higher. But the passive nature of mortgage lending has always intrigued me and that's why note investing sounds so interesting. In the podcast it certainly sounded like note investing can offer much higher returns than what I was able to achieve through 2nd mortgages. 

Because I believe in leverage I would be most interested in learning how to invest in notes on junior loans (2nd mortgages), performing and non-performing. Listening to Dave van Horn's podcast it sounded like there are a whole range of investment strategies with notes and different exit strategies (re-working the loan, selling the note, using the note as collateral for another transaction, and probably a few more...). I also like the idea that note investing contributes positively to the economy and can provide a good solution for a borrower who has experienced some difficulties.

I have downloaded Dave's ebook but need to get a bit more detailed knowledge to truly understand the business and the potential of investing in notes. I also read in another post about finding a mentor in the notes investing world or even joint venturing with an experienced note investor. I am familiar with JVs on the flipping side of real estate but I can't quite picture how a JV would work in the notes investing business.

At any rate, I would definitely like to learn more about note investing and would appreciate any input from other Bigger Pockets members out there who can point me in the right direction, would consider being a mentor or who would can tell me what a JV looks like in the note investing world. Thank you in advance!!!!